Noted for January 26, 2013

Alan Blinderon the Lessons of the Financial Crisis: "Until very recently, one major factor behind the sluggish recovery was the failure of home building to rebound. And one major reason for that was the seemingly unending waves of foreclosures…. If the government had made more lending a condition of receiving aid, that would not have changed a D performance into an A. But it might have gotten us a C+ or a B-…. The “error” of holding interest rates too low for too long was only obvious after the fact, not before. In fact, the Fed had good reasons to hold interest rates very low in the early 2000s: The recovery was pathetic, and we faced a real risk of deflation. And those who place primary blame for the house-price bubble on the Federal Reserve are exaggerating so much that it smacks of a put-on. When home buyers believe that house prices will keep on rising at 10 to 15 percent a year, would, say, a half-percentage-point increase in the mortgage interest rate stop speculation?"

Mark Thoma:Social Insurance: "Socialism is a low mean, low variance economic system…. Worker income, though low, is not subject to substantial variation over time. Other economic risks, such as access to housing and risks related to healthcare are also very low…. Under capitalism the average level of income is much higher, but economic risk is higher as well…. A worker who has shown up to work every day and worked hard to support a family can be suddenly unemployed for reasons unrelated to anything connected to his or her own behavior…. In an agrarian economy, economic security is provided by extended family relationships coupled with the largely self-sufficient nature of farms…. For a worker dependent solely upon wage income, the consequences of a recession are much more severe…. 1920 marks a benchmark year where, for the first time, more than half of the population lived in cities. When the Great Depression hit around a decade later, the social changes the U.S. was experiencing and the need for new ideas regarding the government’s responsibility for the economic security of its citizens became clear. The Great Depression made it evident that in a capitalist system, where the whimsies of the marketplace can wreak havoc on people’s lives, the government has an obligation to provide economic security. It was also evident that the private sector did not provide the needed level of insurance and that government intervention was required to overcome this problem (due to both moral hazard and asymmetric information problems in the private insurance market)."

Jonathan Chait:Paul Ryan Breaks Down Under Wonkterrogation: "Ryan has pitched himself… as a thoughtful numbers guy. Literally every piece of evidence in Ryan’s career – from his formative infatuation with Ayn Rand to his indoctrination in the works of supply-siders to his mentorships under Jack Kemp and Sam Brownback to his entire voting record in public life say that Ryan is a hard core supply-sider whose overarching goal is to reduce tax rates on the rich…. Nevertheless, Ryan has managed to persuade legions of moderates and moderate conservatives – see James Stewart, Ruth Marcus, and Ross Douthat, to take a few examples -- that he is secretly willing to raise tax revenue…. Ryan usually manages to elide the contradiction between the irreconcilable hopes placed in him by evading questioning, using weasel words, or just filibustering long enough to exhaust the topic. That’s what makes his talk Wednesday with Ezra Klein… so interesting…. Klein wouldn’t let him until Ryan had made it perfectly clear he would not accept higher revenue at all, under any conditions…. Ryan simply hurls up nonsensical rationales one after another, and finally offers his actual reason when he has run out of gibberish…. [N]otice how fast Ryan has flipped his logic. First he asserts that there can’t be more revenue because we already increased some revenue. When reminded that we cut spending even more, he says it’s 'last session', and irrelevant. I did not attend this meeting, so I don’t know how many seconds passed between Ryan insisting that a budget agreement in the last Congress inherently rules out a similar action and Ryan insisting that agreements in the last Congress are totally irrelevant to what happens going forward. It couldn’t have been many."

Doug Galt:Saw you in a mag kissing a man: "Nate Silver’s sexual orientation… when I found out, well, it explained a lot. Not about him but about how why there was so much otherwise-mystifying hostility aimed at him (from people like Charles Lane, Bobo, Scarborough, Michael Gerson, etc.). I had the same feeling when I learned that Susan Rice was black and earlier, when I learned that Desiree Rogers was black…. [M]ore and more I find that when someone is inexplicably hated by some establishment in-group, I later learn that there’s some racial/orientation/whatever reason (that isn’t evident from reading their name in print) for it. It’s been eye-opening."

Comments

Alan Blinderon the Lessons of the Financial Crisis: "Until very recently, one major factor behind the sluggish recovery was the failure of home building to rebound. And one major reason for that was the seemingly unending waves of foreclosures…. If the government had made more lending a condition of receiving aid, that would not have changed a D performance into an A. But it might have gotten us a C+ or a B-…. The “error” of holding interest rates too low for too long was only obvious after the fact, not before. In fact, the Fed had good reasons to hold interest rates very low in the early 2000s: The recovery was pathetic, and we faced a real risk of deflation. And those who place primary blame for the house-price bubble on the Federal Reserve are exaggerating so much that it smacks of a put-on. When home buyers believe that house prices will keep on rising at 10 to 15 percent a year, would, say, a half-percentage-point increase in the mortgage interest rate stop speculation?"

Mark Thoma:Social Insurance: "Socialism is a low mean, low variance economic system…. Worker income, though low, is not subject to substantial variation over time. Other economic risks, such as access to housing and risks related to healthcare are also very low…. Under capitalism the average level of income is much higher, but economic risk is higher as well…. A worker who has shown up to work every day and worked hard to support a family can be suddenly unemployed for reasons unrelated to anything connected to his or her own behavior…. In an agrarian economy, economic security is provided by extended family relationships coupled with the largely self-sufficient nature of farms…. For a worker dependent solely upon wage income, the consequences of a recession are much more severe…. 1920 marks a benchmark year where, for the first time, more than half of the population lived in cities. When the Great Depression hit around a decade later, the social changes the U.S. was experiencing and the need for new ideas regarding the government’s responsibility for the economic security of its citizens became clear. The Great Depression made it evident that in a capitalist system, where the whimsies of the marketplace can wreak havoc on people’s lives, the government has an obligation to provide economic security. It was also evident that the private sector did not provide the needed level of insurance and that government intervention was required to overcome this problem (due to both moral hazard and asymmetric information problems in the private insurance market)."

Jonathan Chait:Paul Ryan Breaks Down Under Wonkterrogation: "Ryan has pitched himself… as a thoughtful numbers guy. Literally every piece of evidence in Ryan’s career – from his formative infatuation with Ayn Rand to his indoctrination in the works of supply-siders to his mentorships under Jack Kemp and Sam Brownback to his entire voting record in public life say that Ryan is a hard core supply-sider whose overarching goal is to reduce tax rates on the rich…. Nevertheless, Ryan has managed to persuade legions of moderates and moderate conservatives – see James Stewart, Ruth Marcus, and Ross Douthat, to take a few examples -- that he is secretly willing to raise tax revenue…. Ryan usually manages to elide the contradiction between the irreconcilable hopes placed in him by evading questioning, using weasel words, or just filibustering long enough to exhaust the topic. That’s what makes his talk Wednesday with Ezra Klein… so interesting…. Klein wouldn’t let him until Ryan had made it perfectly clear he would not accept higher revenue at all, under any conditions…. Ryan simply hurls up nonsensical rationales one after another, and finally offers his actual reason when he has run out of gibberish…. [N]otice how fast Ryan has flipped his logic. First he asserts that there can’t be more revenue because we already increased some revenue. When reminded that we cut spending even more, he says it’s 'last session', and irrelevant. I did not attend this meeting, so I don’t know how many seconds passed between Ryan insisting that a budget agreement in the last Congress inherently rules out a similar action and Ryan insisting that agreements in the last Congress are totally irrelevant to what happens going forward. It couldn’t have been many."

Doug Galt:Saw you in a mag kissing a man: "Nate Silver’s sexual orientation… when I found out, well, it explained a lot. Not about him but about how why there was so much otherwise-mystifying hostility aimed at him (from people like Charles Lane, Bobo, Scarborough, Michael Gerson, etc.). I had the same feeling when I learned that Susan Rice was black and earlier, when I learned that Desiree Rogers was black…. [M]ore and more I find that when someone is inexplicably hated by some establishment in-group, I later learn that there’s some racial/orientation/whatever reason (that isn’t evident from reading their name in print) for it. It’s been eye-opening."

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